Canada's slumping economy, including escalating job losses and personal bankruptcies, is weighing on consumer lending at major banks.

Industry executives told a financial services conference in Montreal today that more cracks are appearing in credit-card lending. Faced with higher loss rates, banks are moving swiftly to mitigate their risks by stepping up collections and cutting credit limits to high-risk clients.

Confirmation that more consumers are falling behind, though, is bound to fuel the debate on whether the federal government should step in and regulate the credit card industry.

Canadian Imperial Bank of Commerce, which administers Canada's largest credit card portfolio, is accepting fewer new clients and is keeping a watchful eye on existing accounts.

"(We are) monitoring our accounts earlier and ensuring that we get to our clients and either assist them in other ways of managing their credit ... or simply reducing the available credit where we feel that is absolutely necessary."

Robert Sedran, the conference's host and an analyst with National Bank Financial, said the industry's credit-card loss rates already appear to be outpacing levels recorded in previous recessions. "Already, where we are seems to be worse," he said.

Baxendale, however, said CIBC's loss rates are matching those of previous downturns. Nonetheless, she conceded the sputtering economy is impacting other aspects of the bank's loan book. Mortgage lending has slowed amid the cooling housing market, while more consumers appear to be relying on their personal lines of credit.

"We are seeing the natural draw down of lines of credit authorized over the past two years," she said. "Our average authorized line of credit to home value is approximately 60 per cent and we continue to see well below 50 per cent of the total available facilities being utilized."

The Bank of Montreal is also taking action to limit loan losses, said Frank Techar, head of personal and commercial banking.

"We've maintained conservative underwriting practices over the years and over the last 12 months we've made targeted adjustments to lending strategies to ensure our underwriting is appropriate given the environment," he said.

BMO has increased staff in its collection department and its proactively identifying "high-risk" accounts.

"The consumer loss ratio is rising but it is expected to remain within historic loss," Techar said. While credit-card losses are certainly picking up pace, BMO's losses are less severe than those of other banks.

"In fact, for the last three months that data is available, we are 100 basis points better than the average for the Canadian banks for credit-card loss," Techar said.

"We're ready to do everything we can for our customers that are in distress to get them back on their feet."

The Bank of Nova Scotia, meanwhile, is tightening up its overall risk management strategy and cutting back on expenses. That involves "countless stress testing" in numerous portfolios and slowing down new branch openings.

Despite those measures, Scotiabank's overall loan losses are expected to increase this year, conceded chief executive officer Rick Waugh. "They have to reflect the realities of this market."

Those market conditions, however are looking increasingly grim. Mounting job losses pushed the national unemployment rate to 7.7 per cent in February and some economists believe it could climb as high as 10 per cent before the economy rebounds.

Those shrinking payrolls are also fuelling an increase in consumer bankruptcies. According to the Office of the Superintendent of Bankruptcy, there were 7,944 consumer bankruptcies in January, almost 22 per cent more than a year earlier.

Against that backdrop, Ottawa is facing growing pressure to regulate the credit card industry. A Senate committee is holding hearings again this week on that topic and the NDP is signalling plans to introduce a consumer bill of rights.

"While banks and credit card companies are entitled to earn a fair profit, it shouldn't be generated by ripping off consumers and forcing them into accepting higher interest rates and inexplicable fees," said NDP consumer critic Glenn Thibeault in a release last week.

Credit card companies, however, are warning that heavy-handed regulation in the credit and debit markets will stifle innovation and consumer choice. Yesterday, Tim Wilson, head of Visa Canada, told a Toronto business audience that government regulation would ultimately hurt consumers by limiting competition.

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